Oil Ass v. Hopkins
| Citation | 70 L.Ed. 183,46 S.Ct. 48,269 U.S. 110 |
| Decision Date | 16 November 1925 |
| Docket Number | No. 67,BURK-WAGGONER,67 |
| Parties | OIL ASS'N v. HOPKINS, Collector of Internal Revenue |
| Court | United States Supreme Court |
Messrs. Harry C. Weeks, of Wichita Falls, Tex., and Arnold R. Baar, of Chicago, Ill., for plaintiff in error.
Mr. Alfred A. Wheat, of New York City, for defendant in error.
The Burk-Waggoner Oil Association is an unincorporated joint-stock association like those described in Hecht v. Malley, 265 U. S. 144, 44 S. Ct. 462, 68 L. Ed. 949. It was organized in Texas and carried on its business there. Under the Revenue Act of 1918 (Act Feb. 24, 1919, c. 18, 40 Stat. 1057 (Comp. St. Ann. Supp. 1919, § 6336 1/8 a et seq.)), it was assessed as a corporation the sum of $561,279.20 for income and excess profits taxes for the year 1919. It paid the tax under protest in quarterly installments, and after appropriate proceedings brought this suit in the federal District Court for Northern Texas against the collector of internal revenue to recover one of the installments. The association asserted that it was a partnership, contended that under the act no partnership was taxable as such, and claimed that if the act be construed as authorizing the taxation of a partnership as a corporation, or the taxation of the group for the distributive share of the individual members, it violated the federal Constitution. The District Court entered judgment for the defendant. 296 F. 492. The case is here under section 238 of the Judicial Code (Comp. St. § 1215), on direct writ of error allowed and filed April 21, 1924. Compare Towne v. Eisner, 245 U. S. 418, 425, 38 S. Ct. 158, 62 L. Ed. 372, L. R. A. 1918D, 254.
The Revenue Act of 1918, §§ 210, 211, 218a, 224, 335(c) being Comp. St. Ann. Supp. 1919, §§ 6336 1/8 e, 6336 1/8 ee, 6336 1/8 i(a), 6336 1/8 l, 6336 7/16 n(c), provides in terms that individuals carrying on business in partnership shall be liable for income tax only in their individual capacity, and that the members of partnerships are taxable upon their distributive shares of the partnership income, whether distributed or not. It subjects corporations to income and excess profits taxes different from those imposed upon individuals. See sections 210-213 (sections 6336 1/8 e-6336 1/8 ff) and sections 230, 300 (sections 6336 1/8 nn, 6336 7/16 a). It provides in section 1 (section 6371 1/4 a): 'That when used in this act-* * * The term 'corporation' includes associations, joint-stock companies and insurance companies.' By the common law of Texas a partnership is not an entity, Glasscock v. Price, 92 Tex. 271, 47 S. W. 965; McManus v. Cash & Luckel, 101 Tex. 261, 108 S. W. 800; an association like the plaintiff is a partnership; its shareholders are individually liable for its debts as members of a partnership, Thompson v. Schmitt, 115 Tex. 53, 274 S. W. 554; Victor Refining Co. v. City National Bank of Commerce, 115 Tex. 71, 274 S. W. 561; and the association cannot hold real property except through a trustee, Edwards v. Old Settlers' Association (Tex. Civ. App.) 166 S. W. 423, 426. A Texas statute provides that such associations may sue and be sued in their own name. Act April 18, 1907, c. 128, Vernon's Sayler' Texas Civil Statutes, 1914, title 102, c. 2, arts. 6149-6154. Since the writ of error was allowed, this court has held in Hecht v. Malley that associations like the plaintiff are, by virtue of section 1, subject to the special excise tax imposed by the Revenue Law of 1918 on every 'domestic corporation.'
The Burk-Waggoner Association contends that what is called its property and income were in law the property and income of its members; that ownership, receipt, and segregation are essential elements of income, which Congress cannot affect; that consequently income can be taxed by Congress without apportionment only to the owner thereof; that the income of an enterprise when considered in its relation to all others than the owners is not income within the purview of the Sixteenth Amendment; and that thus what is called the income of the association can be taxed only to the partners upon their undistributed shares of the partnership profits, for otherwise such a distribution would neither enrich, nor segregate anything to the separate use of, a partner. The association further contends that, while Congress may classify all recipients of income upon any reasonable basis for the purpose of imposing income taxes at different rates, or for other purposes connected with the levying and collection of such taxes, it cannot tax the income of the association,...
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